The importance of family law settlement negotiations cannot be overstated.

In a recent Family Court decision, the judge made a costs order against the wife – that she pay the husband $30,000!

Why?

Because, in the judge’s opinion, the wife had let her anger and distress ‘drive the litigation’ and she had failed to make a ‘meaningful attempt’ to negotiate a settlement, including aggressively rejecting the husband’s settlement offer which ended up being more than the judge awarded her.

So, the wife’s poor attitude to settlement resulted in:

1. A lesser share of the asset pool; and
2. A costs order.

I wonder how she’s feeling now – even more angry and distressed?

The moral of the story – negotiate, negotiate, negotiate AND settle, settle, settle.

Vanessa Mathews is an accredited family lawyer and mediator.

If you want to reach a negotiated settlement ASAP, contact Vanessa on 03 9804 7991 or vanessam@mflaw.com.au

An article written for accountants and financial advisors by Vanessa Mathews of Mathews Family Law & Mediation Services.

Your client has the good fortune to receive a ‘windfall’, such as an inheritance or a lotto Your client and their partner separate.

Will the windfall be included in the property settlement asset pool?

Your client will likely answer ‘No Way’!

From the court’s perspective, windfalls are not a special category of contributions and they must be:

Included in the asset pool.

Considered in the same manner as, and holistically with, all of the other contributions made during the relationship– financial, non-financial, homemaker and parenting.

The timing of the windfall will however be relevant as to how the windfall is ‘shared’:

A windfall received early in the relationship is likely to be treated equally.

A windfall received shortly before separation is less likely to be treated equally.

A windfall received after separation is even less likely to be treated equally.

The short answer is that the windfall is unlikely to be retained in full by your client.

I’ll leave it you to break the bad news to them.

Next Steps Before a Divorce Property Settlement

You and/or your client may benefit from discussing the circumstances of the inheritance or other windfall and divorce property settlement before taking any action such as distributing or disposing of the asset in a manner that may adversely impact against your client.

Vanessa Mathews and Kuppy Nambiar are family law specialists with the expertise and experience to advise you about your family law property settlement issues.

Please call Mathews Family Law & Mediation Services on 03 9804 7991 or email enquiries@mflaw.com.au to speak with Vanessa Mathews or Kuppy Nambiar.

When the Australian states referred their powers to legislate about the property of de facto couples (same sex and opposite sex) to the Commonwealth at the turn of the decade, the question of what constituted a de facto relationship under the new legislation became the subject of much debate and, consequently, litigation.

The lay understanding of the term “de facto” tends to assume that there is a single identifying factor or test: for example, you have to live together and both be on the lease, you have to be in a relationship for more than two years, or you have to declare your relationship to Centrelink or the ATO.

As is often the case, however, the legal reality of the situation is not so clear cut.

The definition of a “de facto relationship” can be found in section 4AA of the Family Law Act 1975 and in brief requires that:

parties to a relationship are not legally married to each other;

parties to a relationship are not related by family; and

having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.

It is the word “circumstances” in this third point upon which the discussion turns. The legislation goes on to list a number of circumstances that may (but not necessarily) be of relevance:

the duration of the relationship;

the nature and extent of the parties’ common residence;

whether a sexual relationship exists;

the degree of financial dependence or interdependence, and any arrangements for financial support, between the parties;

the ownership, use and acquisition of the parties’ property;

the degree of mutual commitment to a shared life;

whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;

the care and support of children;

the reputation and public aspects of the relationship.

Having listed the above factors, however, the legislation goes on to specify that not one of them is a prerequisite for the Court finding that a de facto relationship exists: instead, the importance of each factor should be determined by the Court in the particular “circumstances” of the case.

The effect of these sections is to give the Court a wide ranging discretion to determine each situation as the judicial officer deems appropriate. Understandably, this causes consternation in our mutual clients who often struggle to determine whether or not their relationship should be considered a “de facto”, along with the legal, taxation and other ramifications that such a status brings.

It may seem to go against “common sense”, but recent de facto litigation has shown us that a de facto relationship can, based on the above, be found to exist where one (or both) parties to the relationship is already married to another person, where the parties do not and have not lived together, or even where there has not been any sexual intimacy between them.

While it continues to be an area of law that finds its basis in judicial discretion, the issue of classifying de facto relationships will present a potential minefield for parties and their legal and financial advisors. Armed with knowledge of these pitfalls, however, prudent practitioners will be in a position to ensure that these issues are addressed at a time when asset protection and planning remain an option, and certainly before the horse has bolted and the intimate details of the parties’ personal lives are aired before the Family Law Courts.

In Australia, the law affords some protection to couples that have chosen not to get married, yet lead the life of a married couple, including same-sex relationships. Whether you chose not go get married out of convenience, or for religious reasons, you can take comfort in knowing that should you separate, you are entitled to similar protection under the law as if you were married.

It is worth noting that the rules regarding de facto relationships may vary slightly depending on the state or territory, so this article will focus on the federal law laid out in the Family Law Act of 1975.

A de facto relationship exists when two people are not legally married to each other, not related by family, and regarding the circumstances of their relationship, they carry on as a couple living together on a genuine domestic basis. In determining whether a de facto relationship exists, the court will look at a myriad of factors laid out in the Family Law Act, including:

the duration of the relationship;

the nature and extent of their common residence;

whether a sexual relationship exists;

the degree of financial dependence or interdependence, and any arrangements for financial support;

the ownership, use and acquisition of their property;

the degree of mutual commitment to a shared life;

whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;

the care and support of children;

the reputation and public aspects of the relationship.

In order to receive the benefits awarded to de facto relationships under The Family Law Act, the parties must have engaged in a de facto relationship for at least two years (except if there is a child of the relationship or one party made substantial financial contributions).

Recent Changes – Family Law Amendment Act 2008

The Family Law Amendment Act was given Royal Assent in November of 2008 and greatly impacts de facto couples. The amendment brought these relationships under the purview of the federal law and allows them to be treated the same as married couples. The major change brought about by the amendment is that the financial settlement regime was extended to both same sex and heterosexual de facto relationships.

The amendment allows parties to a de facto relationship to seek declaratory relief in relation to their relationship and property, seek maintenance orders, seek property adjustment orders, and the amendment allows de facto couples to enjoy superannuation splitting and financial agreements.

The amendment does not affect de facto couples whose date of separation came prior to March 1, 2009; those relationships are not subject to the laws of the federal system, and are limited to relief awarded under state and territory laws. The date of separation is the sole determining factor as to whether a de facto relationship is governed by state or federal law. Should your de facto relationship have ended prior to this 2009 date, there is one way you may still have access to the federal law. If you and your partner make an unconditional choice to opt in to the federal legislation, and you satisfy the following elements, your separation can fall under the purview of the federal law.

There must be no current order about property or maintenance.

There must be no agreement between the parties enforceable under the state law in existence.

The parties must consent in writing.

The parties must have received independent legal advice as to the advantages and disadvantages of making the choice.

The parties must have received a signed statement confirming the advice from their lawyer.

Generally, this exception is no longer applicable because The Family Law Act has placed a two-year limitation on the institution of matrimonial causes. So, had your de facto relationship ended before March 1, 2009, but no legal action was filed within two years then you would not be eligible for any relief.

Each of the following subsections highlights the relief available to de facto couples thanks to this 2008 amendment.

De Facto Relationships and Property Settlement

The Family Law Act makes little difference between property settlement amongst formerly married couples, and those who were in a de facto relationship. For all intents and purposes, the courts are to treat property settlement issues for married and de facto couples the same, and the language under the Family Law Act is nearly identical.

For an in depth analysis regarding property division, please see the articles in our property settlement centre. With regard to property settlement issues, just know that there is no real distinction between the way the law treats married couples and those who were in de facto relationships. The way that creditors, bankruptcy trustees, and property orders are treated is practically identical.

De Facto Relationships and Maintenance

Similar to property settlement issues, the way in which de facto relationships are treated with regard to maintenance is identical to the way in which married couples are treated. There are provisions in the Family Law Act that discuss the right to maintenance, power to order maintenance, factors to look at, urgent maintenance, and modification of orders that are almost verbatim for both married and de facto couples. You can find an analysis of all of the rules regarding maintenance in our maintenance centre.

De Facto Relationships and Financial Agreements

As you may have guessed, the provisions of the Family Law Act that discuss financial arrangements for married couples is largely the same as the provisions that apply to de facto couples. Parties to a de facto relationship are permitted to enter into financial agreements; the only major distinction being that the agreement will be no longer be binding if a de facto couple later marries. Again, for a more detailed look at the law surrounding financial agreements, please see our property centre.

De Facto Relationships and Superannuation

Superannuation splitting is available to de facto couples to the same extent that it is available to married couples. The only noteworthy distinction is that there are more complex provisions regarding the separation declaration for de facto couples than there are for married couples.

As you can see, thanks to the 2008 amendment, if you are involved in a legally recognised de facto relationship, and you subsequently separate, you are entitled to nearly the same relief you would be entitled to had you and your partner married.

A de facto relationship exists where two people, who are neither married nor related to each other, live together on a genuine domestic basis and includes same-sex relationships.

In determining whether a de facto relationship truly exists, the court will consider several factors, including but not limited to: the duration of the relationship, whether a sexual relationship exists, the degree of financial support, and your reputation and public aspects of your relationship. If you have engaged in a de facto relationship for at least two years, you are entitled to similar relief upon separation that you would be entitled to if you had chosen to marry.

In 2008 major changes were made with regard to the way the law treats de facto couples that subsequently separate. Now, de facto relationships fall under the purview of the federal law and are discussed in The Family Law Act of 1975. The 2008 amendment basically allowed for de facto couples to be entitled to nearly identical relief as married couples in terms of property settlement, maintenance, and financial agreements.

The bottom line is that the law awards some protection for de facto couples even though you and your partner chose not to get married. If you were party to a de facto relationship and have since separated, be sure to contact your lawyer and learn about the types of relief that are available to you.

The Court will consider the length of the relationship, your living arrangements, how you arranged your finances and property ownership, whether there was a sexual relationship, whether or not you had or cared for children and the way you presented your relationship in public.